Export of carbon credits can make India's emissions reduction more expensive

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Mumbai: The sale of carbon credits to overseas entities in voluntary carbon markets (VCM) could make India’s emissions reduction more expensive and difficult, the Economic Survey 2023-24 said, adding that India “may not subsidize the transition of other countries". VCMs comprise trading in carbon credits by entities of their own volition to meet their internal emissions reduction targets. The survey noted that there is uncertainty regarding accounting standards when credits are sold internationally and then redeemed by a foreign entity.

It is not clear if such credits can simultaneously be claimed by the country where they were generated for their emission reduction target, it noted. “If this is not, then with India’s ambitious NDC and net zero announcement, carbon credits sold to foreign entities will make India’s emissions reduction more expensive and difficult," the survey noted. NDC stands for nationally determined contributions, which are commitments made by countries to reduce their greenhouse gas emissions.

Articles 6.2 and 6.4 of the Paris Agreement of 2015, which are yet to be implemented, lay out the guidelines for voluntary bilateral trade of carbon credits between countries. They propose adjustment of credits by the nation of origin to avoid double counting. “The principles are clear, there cannot be double counting.

Otherwise, it defeats the purpose," said Deepto Roy, partner at law firm Shardul Amarchand Mangaldas & Co. What this means is that when an Indian entity sells carbon credits accrued by it to a foreign entity, the benefits of such credits will accrue to the ledger of the foreign country and not India. So, even as the Indian government incentivizes investments in renewable energy and low-emission